Investment managers are being asked by major super funds to work towards making their portfolios carbon-neutral by as soon as 30 June this year, according to a boutique fund manager.
Speaking at a recent Pritchitt Bland Communications media lunch, Maple-Brown Abbott chief executive and managing director Sophia Rahmani said the group had been directed by a major super fund client to prepare their portfolio for carbon neutrality by the end of financial year.
“One of our super clients, which I know has happened to lots of super funds, has said by 30 June, we need a plan on how we’re going to transition over the next three years to being carbon neutral,” Ms Rahmani said.
“They’ve said let’s work through that because we don’t quite know what our board wants us to do. But just like that it’s going to turn into an ESG portfolio, and that’s a board directive from that super fund.”
4D Infrastructure chief investment officer Sarah Shaw agreed that many super funds were rapidly moving towards carbon neutrality across their entire portfolio if they had not done so already.
“You can have stocks that are carbon emitters but they have to be offset by other stocks that are taking carbon out across the portfolio,” Ms Shaw said.
“Every stock in the portfolio doesn’t have to be carbon neutral, it’s actually at the portfolio level.”
Tribeca Investment Partners lead portfolio manager Jun Bei Liu said funds were also allowing managers to offset carbon-intensive holdings through short exposures, but that managers typically faced pressure to sell down carbon emitters by the end of financial year.
“We think it doesn’t stack up to be invested in [carbon-intensive] businesses so we short them against others where we feel there’s more potential, and for my [super fund] clients who are much more stringent in terms of carbon footprint it helps them to offset other managers who are happy to buy those companies,” Ms Liu said.
“They normally have an annual financial year end date so they put a lot of pressure on the managers that own those companies to reduce that because they have to report it. They have to do analysis because their members want to see they are conscious with ESG and they are taking steps to improve on some of those measures.”
However Ms Rahmani said while Australian institutions were more flexible around what constituted sustainable investing, new rules implemented in Europe gave a sense of what was to come in terms of the strict protocols around who could call themselves carbon-neutral.
“The European sustainable finance directive regime regulations are pretty big and requiring you to allocate your product to a pot, and you can’t say you’re dark green if you’re not dark green,” Ms Rahmani said.
“We went through a huge process across all our European products to give consistency on what we are and how green we are.”